M/S. KENTON LEISURE SERVICE EXECUTIVE HOSTEL vs. THE SALES TAX OFFICER
What did the High Court hold?
The High Court, in its appellate jurisdiction, upheld the judgment of the learned single judge. The Court found no reason to interfere with the single judge's well-considered decision. The single judge had previously negatived the appellant's contention that they were not liable to be assessed under the Act. However, the single judge had modified the penalty, reducing it from twice the tax liability to the extent of the tax liability. The appellate court clarified that the observations and findings in the single judge's judgment would not preclude the appellant from raising their contentions before the assessing authority, and the assessing authority was directed to consider these contentions on their merits. The final consequential orders would depend on the final order passed by the assessing authority.
What were the facts?
The appellant, M/s. Kenton Leisure Service Executive Hostel, challenged penalty orders issued under the Kerala Tax on Luxuries Act, 1976, for assessment years 2001-2002 to 2008-2009 and April-May 2009-2010. The Commercial Tax Officer imposed substantial penalties, totaling over Rs. 1.7 crore. These penalties were upheld by the Deputy Commissioner (Appeals) and subsequently by the Sales Tax Appellate Tribunal. The appellant filed a writ petition before the High Court of Kerala, arguing they were not liable for luxury tax. A learned single judge dismissed the appellant's contention of non-liability but reduced the penalty from twice the tax liability to the extent of the tax liability itself. The appellant then filed this writ appeal against the single judge's order.
What were the issues?
1. Whether the appellant is liable to be assessed under the Kerala Tax on Luxuries Act, 1976, given their business model of leasing a building to Tata Consultancy Services (TCS) for trainee accommodation, with TCS paying monthly rent and separate charges for amenities, rather than a day-to-day rent arrangement. Assessee's Arguments: - The appellant contended that the lease was not on a day-to-day basis with a daily rent fixed, and therefore, luxury tax was not attracted. They argued that the transaction was a lease to TCS, who then accommodated their trainees. - They also argued that if the component for amenities was excluded, their revenue would fall below the threshold for luxury tax liability. Revenue's Arguments: - The revenue contended that the appellant was liable to be assessed under the Act. The judgment does not explicitly record the revenue's arguments in detail but implies their stance was upheld by the lower authorities and the single judge.
Which sections of the Income-tax Act were involved?
Kerala Tax on Luxuries Act, 1976
AI-generated summary — verify with the full judgment below
Heard together (2 matters)
Read from the judgment's own cause title. This page is filed under one of them.
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.T.SANKARAN & THE HONOURABLE MR. JUSTICE P.D.RAJAN WEDNESDAY, THE 24TH DAY OF SEPTEMBER 2014/2ND ASWINA, 1936 WA.No. 1258 of 2014 () IN WP(C).673/2012 ------------------------------------------ AGAINST THE ORDER/JUDGMENT IN WP(C) 673/2012 of HIGH COURT OF KERALA DATED 07.07.2014 APPELLANT(S)/PETITIONER: ------------------------- M/S. KENTON LEISURE SERVICE EXECUTIVE HOSTEL NEAR TECHNOPARK CAMPUS, THIRUVANANTHAPURAM REPRESENTED BY ITS GENERAL MANAGER MR.T.N.SREEKUMAR MENON. BY ADV. SRI.ANIL D. NAIR RESPONDENT(S)/RESPONDENTS: ---------------------------- 1. THE SALES TAX OFFICER (LUXURY TAX) DEPARTMENT OF COMMERCIAL TAXES, THIRUVANANTHAPURAM. 2. KERALA AGRICULTURAL INCOME TAX & SALES TAX, APPELLATE TRIBUNAL, ADDITIONAL BENCH, ERNAKULAM. R BY SPL.GOVERNMENT PLEADER SRI. SEBASTIAN CHAMPAPILLI THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 24-09-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: acd
K.T. SANKARAN & P.D. RAJAN, JJ. ------------------------------------------- Writ Appeal No.1258 of 2014 ---------------------------------------------- Dated this the 24th day of September, 2014 JUDGMENT K.T. SANKARAN,J. The appellant namely, M/s.Kenton Leisure Services Executive Hostel challenged the penalty order for the years 2001-2002 to 2008-2009 and April-May 2009-2010 under the Kerala Tax on Luxuries Act 1976 in W.P.(C) No.673/2012. 2. As per Ext.P1 order dated 18.8.2009, the Commercial Tax Officer (Luxury Tax) imposed a penalty of Rs.5,77,500/- on the appellant for the assessment year 2001-2002. As per Ext.P2 order of the same date, the Commercial Tax Officer (Luxury Tax) imposed penalty of Rs.17,32,500/- on the appellant for the assessment year 2002-2003. As per Ext.P3 order of the same date passed by
the Commercial Tax Officer, a penalty of Rs.17,32,500/- was imposed on the appellant for the assessment year 2003-2004. As per Ext.P4 oder of the same date, the same Commercial Tax Officer imposed a penalty of Rs.18,76,860/- on the appellant for the assessment year 2004-2005. Similarly as per Ext.P5 order of the same date, a penalty of Rs.21,65,508/- was imposed on the appellant for the assessment year 2005-2006. As per the order dated 18.8.2009, Rs.21,65,580/- was imposed on the appellant for the assessment year 2006-2007 as penalty. For the assessment year 2007-2008, a penalty of Rs.31,28,040 was imposed and for the assessment year 2008-2009 a penalty of Rs.36,09,240/- was imposed as per Ext.P8 order. As per Ext.P9 order, a sum of Rs.6,01,540/- was imposed on the appellant as penalty for the months of April and May 2009-2010.
The orders mentioned above were challenged in appeals by the appellant before the Deputy Commissioner (Appeals) Kottayam, who, as per Ext.P10 common order dated 18.1.2010, dismissed the appeals. The appellant took up the matter in appeals before the Sales Tax Appellate Tribunal. The Tribunal dismissed the appeals as per Ext.P11 order dated 21-10-2011. The writ petition was filed challenging the aforesaid orders and imposition of penalty under the Kerala Tax on Luxuries Act for the period mentioned above. 4. A learned single Judge as per a detailed judgment, negatived the contentions put forward by the appellant that they are not liable to be assessed under the Act. However, the learned single Judge held that the penalty imposed is excessive and accordingly the penalty was modified and confined to the extent of tax liability,
instead of twice the tax liability. 5. The appellant owns a multi-storied building consisting of several rooms. According to the appellant, the transaction is in the following way; the building is leased out to Tata Consultancy Services, who allows their trainees to stay in the building. Tata Consultancy Services pay the monthly rent on an agreed basis to the appellant. In other words, no rent is fixed on day-to-day basis. Therefore, the appellant contended that they are not liable to pay luxury tax. It is also contended that by a supplementary agreement, several other amenities were provided to the inmates, for which separate charges were being levied by the appellant from Tata Consultancy Services on an agreed rate. Therefore, it was contended that the lease was not on a day-to-day basis fixing a daily rent and therefore, the luxury tax is not attracted. It
was also contended that if amenities component is taken away, the appellant would be below the threshold for payment of luxury tax. 6. It is submitted that proceedings for assessment are pending and therefore, if it is found at this premature stage that the appellant is liable to pay luxury tax, they would be put to great prejudice. It is submitted that on the basis of the judgment rendered by the learned single Judge, the appellant would not be able to put forward any contention in the assessment proceedings, since all those contentions are likely to be rejected on the basis of the judgment of the learned single Judge. 7. After having heard the learned counsel for the appellant and the learned special Government Pleader for Taxes, we do not think that there is any scope for interference in the well considered judgment of the
learned single Judge. However, it is made clear that the observations and findings in the judgment would not stand in the way of the appellant to raise their contentions before the assessing authority and the assessing authority to consider the same on the merits. It is made clear that depending on the final order passed by the assessing authority and depending on the finality of the proceedings for assessment, appropriate consequential orders would be passed. With the above observations, the writ appeal is closed.
K.T. SANKARAN, JUDGE.
P.D. RAJAN, JUDGE. acd
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